Staechelin v ACLBDD Holdings Ltd

The Court of Appeal dismissed the trustees' appeal against Morgan J's finding that the art dealer Mr de Pury was entitled to a $10 million commission for procuring the sale of a painting for $210 million. The court accepted the trial judge's factual findings that (i) an earlier higher figure of $230 million had been discussed, (ii) the judge was not satisfied that Mr de Pury had colluded with the purchaser to conceal any such earlier offer, and (iii) the trustees who agreed to pay the commission were bound to do so under the trust instrument or were personally liable. Key legal principles applied included the high threshold for overturning findings of primary fact on appeal, the law on fiduciary duties and forfeiture of commission (distinguishing secret profit/dishonesty from mere non-disclosure), and the construction of the trust instrument permitting majority decisions and protection for third parties dealing with trustees (Articles III and X).

Background and parties: The case concerned the sale by the trustees of the Rudolf Staechelin Family Trust of a Paul Gauguin painting. The claimants (the trustees: Ruedi Staechelin, Martin Paisner and Carlyn McCaffrey) resisted payment of a $10 million commission claimed by Simon de Pury (acting through his LLP) and alleged that he and/or the purchaser had concealed an earlier $230 million offer, amounting to a breach of fiduciary duty and disentitling him to commission.

Procedural posture: This was an appeal to the Court of Appeal from the Chancery Division (Morgan J) (HC-2014-000468). Morgan J had found for Mr de Pury at trial; permission to appeal was granted by Henderson LJ.

(i) Nature of the claim: Relief sought by the trustees was a declaration that Mr de Pury was not entitled to the claimed commission because he had concealed an earlier higher offer and/or breached fiduciary duties; alternatively, the trustees sought to avoid liability under the trust instrument.

(ii) Issues framed by the court:

• Whether the trial judge’s factual findings that an earlier $230 million offer had been known to the trustees and that no conspiracy to conceal it existed were plainly wrong;
• Whether Mr de Pury’s conduct (non-disclosure to all trustees of the purchaser's later denial of a prior offer) amounted to a breach of fiduciary duty disentitling him to commission;
• Whether the trustees were bound to pay the commission under the trust instrument or whether the two trustees who agreed were personally liable.

(iii) Court’s reasoning and conclusion: The Court of Appeal adhered to the well-established appellate restraint in overturning factual findings, applying authorities on the “plainly wrong” test. It concluded the judge’s findings as to what had been said, who knew what and why parties behaved as they did were rationally open on the evidence. The court held that mere failure to pass on information, without dishonesty or bad faith, does not usually disentitle an agent to commission: the Keppel/ Kelly/Privy Council line shows that forfeiture of commission requires serious disloyalty or dishonesty (e.g. secret profit). On construction, the trust instrument (Articles III and X) and the exoneration clause protected persons dealing with trustees and, in any event, contracting trustees remained personally liable absent express words negating personal liability. The appeal was therefore dismissed.

Appeal dismissed. The Court of Appeal upheld Morgan J's factual findings and conclusions: there was no compelling evidence of a dishonest agreement between Mr de Pury and the purchaser to conceal a prior $230 million offer; non-disclosure of the purchaser's denial was not shown to be dishonest or in bad faith and did not disentitle Mr de Pury to commission; and the trust instrument and ordinary principles of trusteeship meant the trustees who agreed to pay (or alternatively all trustees under the instrument) were bound or personally liable. The court emphasised the high threshold for overturning trial findings of primary fact and applied established authorities on fiduciary duty and forfeiture of commission.

This is an appeal to the Court of Appeal from the High Court of Justice, Chancery Division (Morgan J), case number HC-2014-000468. Permission to appeal was granted by Henderson LJ. The Court of Appeal delivered its approved judgment on 14 May 2019 ([2019] EWCA Civ 817) and dismissed the appeal.